The Morning Call
4/12/21
I am travelling
tomorrow and Tuesday, so here is Monday Morning Chartology
The
Market
Technical
Last week, the
S&P reset its short term trend from a trading range to up. Indeed, this chart is back into the ‘what can
I say?’ territory. The index is above
both DMA’s and in uptrends across all timeframes. My
Market assumption remains: ‘while valuations continue to reach
historical extremes, I can’t see an end to this uptrend as long as the money
keeps flowing with abundance and in the absence of any major negative exogenous
event.’
The long bond struggled
higher on the week. While some progress
was made, it could not make a higher high.
That leaves it in a very short term mini pennant formation. For the moment, it appears a bottom has been
made. But the question is, how much
upside momentum does TLT have? Stay
tuned.
GLD continued to
gather strength last week. While it
remains in a downtrend dating back to last October, it did manage to negate a
really short term downtrend. Remember
that gold got very overextended to the upside late last year. So, the current retreat is normal. It needs
to show more follow through to the upside---like voiding that downtrend dating
from October 2020---before I get too optimistic about a return to former
highs. In short, follow through.
I thought that I
would throw in a picture of the VIX this week.
As you can see, it has been whacked the last couple of weeks, pushing
towards historic lows. That is a signal
that fear is being drained from the Market and ultimately leads to
overconfidence and then correction.
Friday in the
charts.
https://www.zerohedge.com/markets/big-tech-bonds-bid-inflation-jumps-dollar-dumps
Fundamental
Headlines
The
Economy
Review of Last Week
US statistical
releases, including the primary indicators were negative last week. That is a
bit of a surprise; though, again, we are still working our way through February
results. So, one unexpectedly poor week
is no reason to question the ongoing recovery.
The one number
that does bear mentioning is the very hot March PPI report. This likely indicates that the US economy is
entering the period in which everyone agrees will witness rising inflationary
pressures. Where there is disagreement
is whether or not the increases will be transitory. As you know, Chair Powell assures us that
that will be. While many other experts
disagree. As you also know, I am in the
latter camp. Whoever is right is less
important than the fact that we appear to be entering the period of rising
inflation and we will know soon enough if it is a temporary phenomenon or a
more permanent one.
One other
comment. We now know the rough terms of
Biden’s Plan, phase one. Last week, I
held out the hope that if his proposal was composed of productivity enhancing
infrastructure projects and was paid for with taxes (or reduced spending in
other government programs; as if), then, in my opinion, it would be a plus for
the US economy.
Well, no such
luck. Unfortunately, only a fraction of
the spending goes to true infrastructure improvement. The rest is basically social welfare which is
anything but productivity enhancing. The
bottom line is that this plan in its current form would raise inflationary
pressures and inhibit economic growth (servicing a massive increase in debt
usurps capital investment). In short,
this only makes me more convinced that rising inflation and slower secular
growth is the correct forecast.
Overseas, the data
flow was again quite positive, supporting the notion that the rest of the
world’s economies are also recuperating.
Bottom line. ‘As I
have tried to highlight, the issue isn’t whether or not the US (world) economy
is rebounding, the issue is its magnitude and duration. As you know my opinion is that following an
initial snapback, the US economy will likely return to its former subpar
secular growth rate, stymied by irresponsible mix of fiscal/monetary policies.’
US
International
Other
News on Stocks in Our Portfolios
What
I am reading today
Quote of the day.
‘Lost golden
city’ arises out of Egyptian sands.
https://www.zerohedge.com/geopolitical/lost-golden-city-rises-egyptian-sand
Remains of an
alien planet lurk deep within earth’s mantle.
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